In its latest winter report for 2017/18, property consultant Cluttons reveals that while the real estate market experienced stagnation, there are many positive factors which will boost economic growth in 2018.
According to property consultant Cluttons, the real estate market has continued to stagnate during 2017, with the majority of sale and lease activity driven by affordability and incentives being offered by landlords and developers.
Faisal Durrani, Head of Research at Cluttons said: “The nervousness we have been reporting on for almost three years is well entrenched in the market at present. Weaker economic growth has taken a toll on the hydrocarbon sector in particular, which has been a key driver of demand in the residential and commercial markets in the emirate historically.
“Saying that, we are seeing some positives emerge that may help to boost economic growth, including the recent announcement by ADNOC to invest USD 109 billion in its gas downstream growth strategy over the next 5 years. This will likely filter through to the UAE capital’s real estate market in the form of fresh demand for residential and commercial property. However, in the short term we anticipate that both tenants and buyers will continue to err on the side of caution and activity will continue to be driven by affordability and favourable payment terms offered by landlords and developers.”
Cluttons Winter 2017/18 Abu Dhabi Property Market Outlook report indicates that the rental market has been relatively more buoyant than the sales market, with higher levels of activity compared to this time last year. A lot of demand stems from households relocating to make savings and to take advantage of incentives being offered by landlords. These include the accepting of rental payments through multiple cheques, as well as a growing number of landlords who are willing to pay agency fees, which is often up to 5% of the annual agreed rent.
According to recent figures by the Department of Culture and Tourism – Abu Dhabi, the capital accelerated its growth in hotel guests during October with 418,883 guests checking into the emirate’s 163 hotels and hotel apartments, a rise of 18% over the same month last year.
The number of guest arrivals for the first 10 months of 2017 increased to more than 3.9 million, up 8% percent, according to the Department of Culture and Tourism – Abu Dhabi. The authority said the UAE capital remains on track to surpass last year’s record total of 4.4 million visitors, according to a report by Arabian Business. Saif Saeed Ghobash, Director General, Department of Culture and Tourism – Abu Dhabi, said: “Our sustained efforts in improving the worldwide appeal of Abu Dhabi to tourists for both business and leisure is continuing to reap rewards, with the latest figures for guest arrivals supporting our endeavours. As we head towards the end of year, we expect that Abu Dhabi’s packed calendar of Q4 events will prove significant in boosting these numbers.”
Edward Carnegy, Head of Cluttons Abu Dhabi said, “With household finances under pressure due to a reduction in housing allowances, the removal of various subsidies and the impending introduction of VAT in January 2018, tenants are focused on value for money, as well as quality”.
For now, Cluttons says, the rate of decline in rents across the city’s residential investment areas slowed to -1.8% in Q3, from -3.6% in Q2. The annual rate of change has however slipped further to -11.8%.
In the sales market, Cluttons’ report indicates that residential capital values across Abu Dhabi’s freehold investment areas declined by 0.4% in the three months to the end of September, leaving them just shy of AED 1,150 psf, a level not seen since early 2014. Overall, house prices are now 4.1% below where they were at the same time last year.
Carnegy added, “Due to the sustained drop in demand, we have seen developers respond by offering attractive payment plans, as well as bringing residential developments through that are far more affordable than what we have seen previously. Water’s Edge by Aldar, for instance, has been a runaway success, with the Yas Island scheme netting the developer some AED 800 million through off plan sales of all units.”
According to the Oxford Business Group (OBG), in addition to receiving higher numbers of visitors from China and Russia, the emirate is also seeing growth in the number of hotel stays among visitors from some other key source markets, with 11% y-o-y growth recorded for U.S travellers, 9.8% for those from India and 7.8% for Saudi Arabians.
In November, Abu Dhabi's tourism sector saw the opening of the Louvre on Saadiyat Island, which is expected to draw 4.9 million visitors by the end of the year. OBG said the anticipated success of the Louvre Abu Dhabi in attracting high numbers of visitors could also provide impetus for another multibillion-dollar cultural project on the island – Guggenheim Abu Dhabi.